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Transcript of Deutsche Bank AG Johannesburg Pillar 3 Disclosure Deutsche Bank Group: South Africa Deutsche Bank...

  • Deutsche Bank AG Johannesburg Pillar 3 Disclosure For the year ended 31 December 2017

    Deutsche Bank Risk & Capital Management

  • Contents Page

    Overview 1

    Deutsche Bank Group: Our organisation 2

    Deutsche Bank Group: South Africa 2

    Financial position 3

    Capital composition 5

    Leverage position 6

    Risk management overview 7

    Credit risk 9

    Liquidity risk 14

    Operational risk 16

    Market risk 18

    Interest rate risk in the banking book 20

    Remuneration 21

    Glossary of risk terms and definitions 23

    Acronyms and abbreviations 25

    Deutsche Bank Pillar 3 disclosure

  • Overview The following information is compiled in terms of the requirements of the Banks Act 1990 (as amended) and Regulation 43(1)(e)(iv) and 43(2) of the Banking Regulations, whereby banks (including foreign branches) are obliged to report certain qualitative and quantitative information with regards to their risk profile and capital adequacy on a regular basis to the public, which incorporates the revised Basel III Pillar 3 requirements on market discipline.

    Reporting framework The information disclosed in this report is based on the definitions, calculation methodologies and measurements as defined by the Amended Regulations. All tables, diagrams, quantitative information and commentary in this risk and capital management report are unaudited unless otherwise noted.

    References to fixed format templates as required under the revised Pillar 3 disclosure requirements are made throughout this document and highlighted in the relevant sections.

    Period of reporting This report is in respect of the year ended 31 December 2017, including comparative information (where applicable) for the year ended 31 December 2016.

    Group disclosures The Group employs a predominantly centralised approach to risk management. As such, Deutsche Bank Johannesburg’s (DBJ’s) approach to risk management follows Group policies and procedures as a minimum standard. Where local requirements differ from Group’s, a local policy/procedure is formulated and adopted. This report should thus be read in conjunction with the Group’s management report. Where appropriate this document provides links to the Deutsche Bank AG reports for the year ended 31 December 2017 which can also be found directly at:

    Management report https://annualreport.deutsche-bank.com/2017/ar/servicepages/downloads/files/dbfy2017_management_report.pdf

    Risk report https://annualreport.deutsche-bank.com/2017/ar/servicepages/downloads/files/dbfy2017_risk_report.pdf

    Compensation report https://annualreport.deutsche-bank.com/2017/ar/servicepages/downloads/files/dbfy2017_compensation_report.pdf

    Pillar 3 report https://annualreport.deutsche-bank.com/2017/ar/servicepages/downloads/files/dbfy2017_pillar_3.pdf

    1Deutsche BankPillar 3 disclosure

  • Deutsche Bank Group: South Africa

    Deutsche Bank Group: Our organisation Headquartered in Frankfurt am Main, Germany, we are the largest bank in Germany and one of the largest financial institutions in Europe and the world, as measured by total assets of €1 475 billion as of 31 December 2017. As of that date, we employed 97 535 people on a full-time equivalent basis and operated in 60 countries out of 2 425 branches worldwide, of which 85% were in Germany. We offer a wide variety of investment, financial and related products and services to private individuals, corporate entities and institutional clients around the world.

    As of 31 December 2017 we were organised into the following three corporate divisions: — Corporate and investment banking (CIB) — Private and commercial clients (PCB) — Deutsche asset management (DAM).

    The three corporate divisions are supported by infrastructure functions. In addition, we have a regional management function that covers regional responsibilities worldwide. In line with our targets originally announced from 2017 onwards, the non-core operations unit (NCOU) will cease to exist as a separate corporate division of the Group from 2017 onwards.

    History Deutsche Bank has been represented in South Africa since 1979 and expanded its presence in 1995 through the acquisition of local stockbroker Ivor Jones, Roy & Co. Deutsche Bank AG then went on to establish a branch in Johannesburg in 1998 – Deutsche Bank AG Johannesburg Branch.

    The South African branch offers a full range of competitive products and services focusing on fixed income and repos, foreign exchange, interest rate derivatives, loans and deposits, securities lending and equity derivatives.

    Branch management The members of the branch management during the year and up to the date of this report are:

    — M Ismail — B Landman — M Dowie*.

    * Non-voting member.

    2 Deutsche BankPillar 3 disclosure

  • Financial position In terms of the requirements of the Banks Act and Regulations relating to banks, the financial results presented below have been prepared in accordance with International Financial Reporting Standards issued from time to time, with additional disclosure when required. While branches of foreign banks are not required to publish financial statements, the information provided below is required in terms of their Pillar 3 disclosures.

    Financial position/balance sheet1 The balance sheet reflects what the branch owns, owes and the equity that is attributable to shareholders at 31 December 2017. 1 Source: 31 December BA 100 (audited).

    December 2017

    R’000

    December 2016

    R’000

    Assets Cash and balances with central bank 87 132 47 447 Short-term negotiable securities 1 530 755 1 800 610 Loans and advances to customers 5 694 748 4 002 465 Investment and trading securities 149 605 – Derivative financial instruments 2 892 606 4 378 282 Property and equipment 574 512 Current income tax receivables – 1 989 Deferred income tax assets 21 096 30 898 Other assets 57 241 129 211

    Total assets 10 433 757 10 391 414

    Liabilities Deposits, current accounts and other creditors 6 089 442 4 682 716 Derivative financial instruments and other trading liabilities 2 933 181 4 329 582 Other liabilities 94 142 91 792

    Total liabilities 9 116 765 9 104 090

    Equity Total equity attributable to equity holders 1 316 992 1 287 324 Donation capital 884 639 884 639 Retained earnings 432 353 402 685

    Total equity 1 316 992 1 287 324

    Total equity and liabilities 10 433 757 10 391 414

    Results of operations/income statement2 The income statement reflects the revenue generated by the branch as well as the costs incurred in generating that revenue for the year ended 31 December 2017.

    2 Source: 31 December BA 120 (audited). December

    2017 R’000

    December 2016

    R’000

    Net interest income 95 685 164 483 Non-interest revenue 69 300 41 059

    Operating income 164 985 205 542 Operating expenses 123 201 175 446

    Profit before income tax 41 784 30 096 Income tax 12 119 9 827

    Profit for the year 29 665 20 269

    3Deutsche BankPillar 3 disclosure

  • Financial position continued Capital adequacy In terms of the requirements of the Banks Act and Regulations relating to banks, the branch has complied with the minimum capital requirements for the period under review.

    The branch’s regulatory capital is split into two tiers: — Tier 1 capital, which is comprised solely of Common Equity Tier 1 capital, which includes donation capital, and appropriated retained earnings — Tier 2 capital, which includes a general allowance for credit impairment.

    The minimum capital requirements are defined by three ratios: — Common Equity Tier 1 capital as a percentage of risk weighted assets — Tier 1 capital as a percentage of risk weighted assets — Total qualifying capital as a percentage of risk weighted assets.

    RWA December

    2017 R’000

    RWA December

    2016 R’000

    Minimum capital

    requirements1

    December 2017

    R’000

    1 Credit risk (excluding counterparty credit risk) (CCR) 1 715 632 1 372 798 184 430 2 Of which standardised approach (SA) 1 715 632 1 372 798 184 430 3 Of which: internal ratings-based (IRB) approach – – – 4 Counterparty credit risk 3 164 854 2 850 054 340 222 5 Of which standardised approach for counterparty credit risk (SA-CCR) – – – 6 Of which internal model method (IMM) – – –

    Of which current exposure method (CEM) 3 164 854 2 850 054 340 222 7 Equity positions in banking book under market-based approach – – – 8 Equity investments in funds – look-through approach – – – 9 Equity investments in funds – mandate-based approach – – – 10 Equity investments in funds – fall-back approach – – – 11 Settlement risk – – – 12 Securitisation exposures in banking book – – – 13 Of which: securitisation internal ratings-based approach (SEC-IRBA) – – – 14 Of which: securitisation external ratings-based approach (SEC-ERBA),

    including internal assessment approach (IAA) – – – 15 Of which: securitisation standardised approach (SEC-SA) – – – 16 Market risk 66 650 54 638 7 165 17 Of which standardised approach (SA) 66 650 54 638 7 165 18 Of which internal model approaches (IMA) – – – 19 Operational risk 336 964 308 655 36 224 20 Of which basic indicator approach